Does The Attempt To ‘Debunk Five Big Myths About Big Pharma’ Not Reconfirm The Truth?

Late last week while returning to India, to my pleasant surprise, I bumped into a longtime overseas friend and his wife working in the pharma industry. Incidentally, they were also traveling in the same flight with a plan to spend their vacation in India.

We both were immensely delighted spotting each other, and were trying to catch up with plethora of subjects at a break-neck speed and mostly with child-like zest. As a result, we were jumping from one topic to another, keeping many loops of discussion unknowingly incomplete.

One such rapid-fire colloquy got almost permanently interrupted with the final boarding announcement. It happened, just when he was referring to busting of some “myths about Big Pharma” by the global CEO of one of the Big Pharma constituents, recently. The article, he said before we got up, was published in the May edition of Forbes Magazine.

As I had missed this curious narrative during my recent relatively long overseas travel commitments, yesterday in Mumbai I did trace that out with the help of our “Google Guru” and went through the content of the article with interest.

‘Debunking Five Big Myths About Big Pharma’:

In the May 19, 2015 issue of Forbes Magazine, I came across an Op-Ed, titled “Debunking the Five Big Myths About Big Pharma”, written by Mr. John Lechleiter, President, Chairman and CEO of Eli Lilly and Company, whom I immensely respect as an icon of the global pharma industry.

The author in his article identified the ‘Five Myths’ as follows:

Myth1: Pharmaceutical companies exaggerate the costs of developing new medicines to justify high prices.

Myth 2: Industry does not develop most new medicines; they come from government and university laboratories.

Myth 3: Prescription medicines are the main driver of health-care cost increases.

Myth 4: Public and private health-care payers must accept and pay whatever prices drug companies charge for medicines.

Myth 5: Government-controlled pricing of medicines in other countries explains their lower health-care costs.

The article is indeed interesting, as it raises more questions than answers. This is mainly because, ‘the debunking of the Five Myths’ was done using the same old fragile arguments much often repeated by the international ‘Big Pharma Trade Associations’ and by some others as well, whom many call privately as their ‘poodles’, although I am not very sure about that.

The reason and time for ‘debunking’:

In the above Op-Ed John Lechleiter forcefully asserts:

“The Big Five Myths’ about this industry routinely poison debates, obscure genuine problems, and distort policy recommendations on healthcare. These myths have been all over the public arena again recently, and it’s time to confront them systematically.”

“The First Big Myth”:

As stated above, the Eli Lilly Chief described the first ‘Big Myth’ of ‘Big Pharma’ as follows:

“Pharmaceutical companies exaggerate the costs of developing new medicines to justify high prices.”

Arguments behind debunking the ‘Big Myth 1’:

The Chief debunked the first ‘Big Myth’ with the following argument:

“In fact: The research and development (R&D) expenditures of this industry are staggering – and since they are matters of public record there is no way and no need to exaggerate them.”

Raises more questions than answers:

Just to illustrate my point, that this article raises more questions than answers, I shall, try to explain the so called ‘debunking’ of this first of the ‘Five Big Myths’ of ‘Big Pharma’, as penned by Lechleiter.

The author seems to have missed the core narrative behind the so-called ‘Myth’ – lock stock and barrel. Whether deliberately or not, I can’t really figure that out.

The reason behind high costs of patented drug:

Even if for the arguments sake, what the author has said is accepted as a gospel truth while ‘debunking Myth 1’, experts’ discourses on the facts behind high costs of patented drugs do not just focus just on the ‘R&D Costs’, it also seriously points towards abnormally high ‘Marketing Costs’, which in many instances several times more than the ‘R&D Costs’.

Some hard facts:

An article of 6 November 2014 of BBC News, titled “Pharmaceutical industry gets high on fat profits” written by Richard Anderson, Business reporter, BBC News highlights:

Drug companies justify the high prices they charge by arguing that their Research and Development (R&D) costs are huge. On average, only three in 10 drugs launched are profitable, with one of those going on to be a blockbuster with US$1bn-plus revenues a year. Many more do not even make it to market.

But as the table below shows, drug companies spend far more on marketing drugs – in some cases twice as much – than on developing them… and besides, profit margins take into account R&D costs.

World’s largest pharmaceutical firms
Company Total revenue ($bn) R&D spend ($bn) Sales and marketing spend($bn) Profit ($bn) Profit margin (%)
Johnson & Johnson (US) 71.3 8.2 17.5 13.8 19
Novartis (Swiss) 58.8 9.9 14.6 9.2 16
Pfizer (US) 51.6 6.6 11.4 22.0 43
Hoffmann-La Roche (Swiss) 50.3 9.3 9.0 12.0 24
Sanofi (France) 44.4 6.3 9.1 8.5 11
Merck (US) 44.0 7.5 9.5 4.4 10
GSK (UK) 41.4 5.3 9.9 8.5 21
AstraZeneca (UK) 25.7 4.3 7.3 2.6 10
Eli Lilly (US) 23.1 5.5 5.7 4.7 20
AbbVie (US) 18.8 2.9 4.3 4.1 22

The article states that in 2013, US giant Pfizer, the world’s largest drug company by pharmaceutical revenue, made an eye-watering 42 percent profit margin. The same year, five other major pharmaceutical companies made a profit margin of 20 percent or more – Hoffmann-La Roche, AbbVie, GlaxoSmithKline (GSK) and Eli Lilly.

Why does the drug industry spend more on marketing than on R&D?

Thus, one most persistent question that is being raised by the stakeholders is: Why does the drug industry spend more on marketing than on R&D?

Quoting these facts, a November 6, 2014 article of ‘FiercePharma’, titled “New numbers back old meme: Pharma does spend more on marketing than R&D”, also pointed out that even John Lechleiter headed Eli Lilly’s marketing spending clocked US$5.7 billion, compared with US$5.5 billion for R&D. That’s a difference of 7 percent.

High marketing expenditure and increasing marketing malpractices:

Interestingly there appears to be a curious coincidences between fines paid by ‘Big Pharma’ related to alleged marketing malpractices and spiraling marketing expenditure.

As I indicated earlier in my Blog Post of December 29, 2014, the following are a few recent examples of just the last three years to help fathom the enormity of the problem on this issue and also to vindicate the point made above:

  • In March 2014, the antitrust regulator of Italy reportedly fined two Swiss drug majors, Novartis and Roche 182.5 million euros (U$ 251 million) for allegedly blocking distribution of Roche’s Avastin cancer drug in favor of a more expensive drug Lucentis that the two companies market jointly for an eye disorder.
  • Just before this, in the same month of March 2014, it was reported that a German court had fined 28 million euro (US$ 39 million) to the French pharma major Sanofi and convicted two of its former employees on bribery charges.
  • In November 2013, Teva Pharmaceutical reportedly said that an internal investigation turned up suspect practices in countries ranging from Latin America to Russia.
  • In May 2013, Sanofi was reportedly fined US$ 52.8 Million by the French competition regulator for trying to limit sales of generic versions of the company’s Plavix.
  • In August 2012, Pfizer Inc. was reportedly fined US$ 60.2 million by the US Securities and Exchange Commission to settle a federal investigation on alleged bribing of overseas doctors and other health officials to prescribe medicines.
  • In April 2012, a judge in Arkansas, US, reportedly fined Johnson & Johnson and a subsidiary more than US$1.2 billion after a jury found that the companies had minimized or concealed the dangers associated with an antipsychotic drug.

Where does most of the marketing expenditure go?

On February 11, 2015, an article published in the ‘The Washington Post’ titled, “Big pharmaceutical companies are spending far more on marketing than research”, stated:

“Most of this marketing money is directed at the physicians who do the prescribing, rather than consumers.”

The HBO video that had gone viral:

The HBO Video with a dash of characteristic British humor of “John Oliver: Marketing to Doctors (HBO)” captures the essence of the issue. Many readers much have watched this video earlier. Nevertheless it helps understanding the point.

Some people associated with the industry did attempt nitpicking on this video and quite understandably; they did not find many takers.


As deliberated above, I submit with humility that there are ample hard facts, which would debunk even more forcefully, the ‘debunking of the remaining so called four myths’ as was elucidated in the Forbes Magazine article authored by well-respected John Lechleiter, the President, Chairman and CEO of Eli Lilly and Company.

This seemingly well-timed article from the global pharma icon, though with disappointedly fragile content, I reckon, would not be able to evoke the desired response from its target audience. On the contrary, it carries the risk of being construed as no more than a half-hearted attempt of defending the indefensible and in that process reconfirming the truth, camouflaged in the paper as ‘myths’.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Envisaging ‘five emerging key strategic changes’ in the Indian Pharmaceutical Industry

In India, the domestic pharmaceutical market has clocked a CAGR of around 13% to 14% since the last five years. Currently, the market is dominated by the drugs for mass ailments. However, such trend has already started showing a shift towards ailments related to the life-style of patients. This emerging trend is expected to fast accelerate in future.All such factors put together, driven by the following key drivers for growth backed by strong logistics support and hopefully improving healthcare delivery system are expected to contribute significantly towards faster growth of the Indian pharmaceutical industry, as we move on.Key growth drivers:

The growth drivers may primarily be divided into two categories:

- Local and
- Global


• Rapidly growing more prosperous middle class population of the country.

• High quality, cost effective, domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets.

• Rising per capita income of the population and in-efficiency of the public healthcare system will encourage private healthcare systems of various types and scales to flourish.

• Expected emergence of a robust healthcare financing/insurance model for all strata of society.

• Fast growth in Medical Tourism.

• Evolving combo-business model of global pharmaceutical companies with both patented and generic drugs boosting local outsourcing opportunities.


Global pharmaceutical industry is going through a rapid process of transformation. Cost containment pressures due to various factors are further accelerating this process. Some of the critical effects of this transformation process like Contract Research and Manufacturing Services (CRAMS) will drive growth of many Indian domestic pharmaceutical players.

Expecting the need for ‘New Strategic Changes’ of radically different in nature:

The impact of many of these evolutionary changes is being felt in India already. However, some more radically different types of changes, which the industry has not experienced, as yet, are expected to be felt as the country moves on to satisfy the desired healthcare needs of its population while fully encashing the future growth opportunities of the Indian pharmaceutical industry.

Five ‘New Strategic Changes’ envisaged:

Five new key strategic changes, in my view, will be as follows:

1. As the country will move towards an integrated and robust healthcare financing system:

• Doctors will no longer remain the sole decision makers for the drugs that they will prescribe to the patients and the way they will treat the common diseases. Healthcare providers/ medical insurance companies will start playing a key role in these areas by providing to the doctors well thought out treatment guidelines.

• For a significant proportion of the products that the pharmaceutical companies will sell, tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable.

• Health Technology Assessment (HTA) or outcome based pricing will play an important role in pricing a healthcare product.

2. An integrated approach towards disease prevention will emerge as equally important as treatment of diseases.

3. A shift from just product marketing to marketing of a bundle of value added comprehensive disease management processes along with the product, will be the order of the day

4. Patents will be granted on truly innovative medicines and incremental innovation to be protected within the patent life of the original product only or separately for a much lesser period.

5. Over the counter medicines, especially originated from natural products for common and less serious illness, will curve out a larger share as the appropriate regulations will be put in place.


With the above changes in the ball game of the Indian pharmaceutical industry, it may not be easy for the local players to adapt to such changes sooner and compete with the global players on equal footing. Those Indian Pharmaceutical companies who are already global players on their own rights, will be well versed with the nuances of this new game, within the country. These domestic companies, in my view, will offer a tough competition to the global players, especially, in the generic space.

However, so far as other domestic players are concerned, the new environment could prove to be a real tough time for them, further accelerating the process of consolidation within the Indian pharmaceutical industry. So the ‘writing on the wall’ appears to be ‘prepare now’ or ‘perish’.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.